@Bruce Weyer Your procedures as far as accruing your property tax and creating a bank sub-account for your reserve are perfectly fine since it serves your purpose without skewing the numbers. 

Oviously we need an attorney for this.Here's our procedure list so far.

We all agree that it is a potentially dangerous procedure but, in your experience, have you run across any indication that it is considered fraud under any particular laws?

The section 8, HUD and CHCS inspectors that I deal with are satisfied if this procedure is followed and nothing is loose, chipped or flaking.

These examination procedures do not cover the state registration requirements.What is confusing is that CSBS and NMLS are not federal agencies, but they were the source of this model legislation.I hope that answers your question.

If your intent in purchasing that house was primarily to resell it (pretty much the definition of flipping) then no matter what you did procedurally it will not qualify for a 1031 exchange. 

The processes you have in place right now may be sufficient for what you're doing but maybe totally insufficient when you scale which will force you to create new procedures as you grow.

Standard operating procedure. 

Now that I will be making my investment, I am unsure how to procedure when it comes to setting up my banking account.

Serve the notice, follow the procedures, but still be cordial with the tenant so they don't wreck the place.